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TMI Blog2018 (2) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses met by the assessee one cannot escape the conclusion that similar expenses would have been incurred by the State, had it performed that work itself or though it's own agencies. The payments received were utilized to defray the expenses met to perform the task of cooking and supplying the meals as directed by the State government. It is also not the case of the revenue that the assessee was in any manner free to utilize either the materials supplied to it or food cooked by it, as per it's own wish/discretion. The assessee appears to have acted merely as an agent of the State. Therefore it would be wrong to conclude that because there existed a contract between the assessee & the government therefore the assessee was not pursuing a "charitable purpose". On the other hand the activity performed by the assessee clearly appears to be inseparably linked to the 'charitable purpose' of providing mid-day meals at village schools. Also, admittedly, the total receipts of the assessee were below the limit of ₹ 10,00,000/- as stipulated under the second proviso to Section 2(15) of the Act. Tribunal has rightly concluded that the restriction created by the first proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society U/s 12-AA and not considering the facts that the assessee's sole activity was in the nature of trade, commerce or business which does not make its activities as advancement of any activities of general public utility and, therefore, it was ineligible for registration in terms of the first proviso of Section 2(15) of I.T. Act. While, the Commissioner of Income Tax, Meerut had rejected the assessee's application for grant of registration under Section 12-AA (1) (b) (ii) of the Act, the Tribunal allowed the assessee's appeal and directed the CIT to register the assessee under Section 12-AA of the Act. The assessee claims itself to be a registered society formed with the object to establish and run Health Club, Arogya Kendra, to organize emergency relief centers etc. It also claims to work to promote moral values, eradication of child labour and dowry etc. The assessee filed an application under Section 12-AA of the Act, on 17.5.2010 for grant of registration. At that time, admittedly the assessee was engaged mainly in preparing and supplying mid-day-meals to the students at primary schools in various villages, against a contract awarded by the Basik Shiksh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee was purely contractual. According to him, it was therefore for the assessee to lead such evidence and establish that it was actually engaged in an activity of 'general public utility and not an activity covered under the first proviso to Section 2(15) of the Act. According to the learned counsel for the revenue, no such evidence was led by the assessee. Third, he submits according to the Commissioner the assessee was discharging purely commercial obligations in pursuance of the contract awarded to it and it could not claim benefit of exemption that may have been available to a person/assessee/such as the State authorities engaged in providing free of cost mid-day-meals at village schools. While the State was not charging any money for such an activity, the assessee was charging consideration to prepare and distribute such mid-day-meals. He therefore submits, the Commissioner had rightly found such work to be a business activity that fell within the description of trade, commerce or business appearing in the first proviso of Section 2(15) of the Act. Then, referring to the second proviso to Section 2(15) of the Act, learned counsel for the revenue subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow ₹ 10,00,000/-, it was clearly entitled to registration under Section 12-AA of the Act. Having considered the argument so made by learned counsel for the parties, we first take note of the provision of Section 2(15) of the Act. It reads as below:- 2(15) Charitable purpose' includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility. Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or applications, or retention, of the income from such activity: (emphasis supplied) Later, by Finance Act, 2010 second proviso to Section 2(15) of the Act was inserted with retrospective effect from 1.4.2009. It was reads as below:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny assessee are conducted on a day-to-day basis and accounts are made up at the year end. Therefore, at the relevant time i.e. during the previous year relevant to an assessment year, it may not always be predicted or determined or known as to whether the receipts (from activities have been specified in the first proviso to Section 2(15) of the Act) exceed the statutory limit of ₹ 10,00,000/- set in the second proviso to Section 2(15) of the Act. Then Section 13(8) of the Act had also been incorporated with retrospective effect from 1.4.2009 i.e. the date of introduction of the first proviso to Section 2(15) of the Act. Thus notwithstanding a pre-existing registration certificate under Section 12A of the Act, if as a fact, it were found during the assessment proceedings of an assessee (holding registration under Section 12A or Section 12AA of the Act), that it's receipts arising from the activity (falling under the first proviso to Section 2(15) of the Act), exceeded the limit of ₹ 10 lacs in the relevant previous year, such receipts would not be eligible for exclusion from the total income of that assessee under Section 11 or 12 of the Act. The scheme of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic utility which is also accepted by the learned CIT himself in paragraph 4 of his order reproduced above by us. The Tribunal has, upon examination of the assessee's income expenditure account found: (i) the total receipts (from the activity conducted by the assessee) were less than ₹ 10,00,000/-. Then, more importantly the Tribunal found (ii) the activity of the assessee involved preparation of mid-day-meals and it's supply to primary schools in villages as directed by the State Government; the assessee incurred kitchen expenses; salary expenses and; transportation expenses. Other than that, the assessee incurred nominal office expenses telephone charges. Total excess of income over expenditure have been mentioned by the Commissioner at ₹ 2,432/- only. The Tribunal then concluded that the activity of the assessee was one of general public utility. Learned counsel for the revenue does not dispute the correctness of the aforesaid findings of the Tribunal. No material had been brought on record to doubt the correctness of this finding of the Tribunal. Merely because the State had itself not been able to cook and supply cooked food by way of mid-day- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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